Student Loans & Bankrupcy

  • kuroshiro

    Posts: 786

    Aug 09, 2013 2:52 AM GMT
    Today, I once again assessed my current student loan plight and tried crunching some numbers only to have several calculators tell me the following:

    THE DEBT CANNOT BE PAID OFF WITH THE GIVEN MONTHLY PAYMENT AND INTEREST RATE! THE MONTHLY PAYMENT IS TOO LOW TO EVEN PAY THE INTEREST ON THE LOAN.

    My current total: $102,119.60.

    For the number curious:

    FEDERAL (STAFFORD):

    Unsubsidized-01: $4,383.66
    Unsubsidized-02: $10,121.42
    Subsidized-01: $6,010.54
    Subsidized-02: $6,047.49
    Subsidized-03: $10,017.09
    Accrued Interest: $1,072.,37
    --------------------
    Total: $37,652.57

    Current Repayment: Income-based ($65.87/month)

    PRIVATE (SALLIE MAE):

    Loan-01: $21,753.85 (9.75% Interest)
    Loan-02: $17,698.47 (8.25% Interest)
    Loan-03: $15,696.40 (6.25% Interest)
    Loan-04: $9,318.31 (9.75% Interest)
    --------------------
    Total: $64,467.03

    Current Repayment: Interest only ($452.71/month)

    Has anyone on here, or does anyone know of anyone, that has successfully gotten rid of their student loan debt in bankruptcy? It's not something I really want to do, but I've tried working with them (the government ones are the only ones willing to bend it seems), but so far there are 'no options'. There are if I magically stop making payments for Sallie Mae at least, but then that starts to hurt my co-signer (my mother), which I cannot do.

    Once before I contacted Sallie Mae about a consolidation option. First I got a "we don't do that anymore". Then I got a "we can't consolidate them all together because we don't want to step on the lenders toes". When asked what they meant about that, I was told that because different lenders approved my loans (which was COMPLETELY out of my control), I don't have much leverage in hopes of bringing down my payments.

    I honestly started bawling when I realized I was spinning my wheels and not going anywhere with this. That and maybe jump off a bridge or something. It depresses me considerably. I saw that there are some "loan forgiveness" programs, but that doesn't apply to me given my line of work, not would it considering I wouldn't be able to find a job in some of the particular fields.

    So, I guess my odds of spending a dollar on the Mega Millions jackpot every week may help, right? icon_razz.gif

    It's getting harder and harder to pay every month. It seems like shit hits the fan for me every time I think I'm going to be on top of things... dental work, a weird bill that comes out of nowhere, etc. I can't seem to win...

    Thoughts?
  • Posted by a hidden member.
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    Aug 09, 2013 2:55 AM GMT
    Federal Student loan debt is not affected by bankruptcy as far as I know.
  • MadeinMich

    Posts: 1624

    Aug 09, 2013 2:57 AM GMT
    I'm so sorry. I feel for you. I'm going through the same thing. Those private loans are a BITCH!!! Wish I never took them out.
  • kuroshiro

    Posts: 786

    Aug 09, 2013 2:58 AM GMT
    asspermativeaction saidwhat was your major in college and which school did you go to? 100,000 dollars is serious. icon_neutral.gif


    My major was Linguistics and Japanese. Basically when I transferred from a community college to a university, I took out money with Sallie Mae to move out of my house. I got an apartment on campus. The total amount was around $43K I think. So I have a little over 20K in interest that capitalized as a result.
  • Posted by a hidden member.
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    Aug 09, 2013 3:01 AM GMT
    federal loans will not go away with bankruptcy. you cannot default on them. the debt is there until you pay it off. private loans, I believe do go away with bankruptcy, but I don't know for certain.
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    Aug 09, 2013 3:01 AM GMT
    I've heard that there is absolutely no way to get rid of student loan debt (other than paying it off, of course), even if you go bankrupt. It will follow you. I'm not American, though, so I don't know the details. You have my sympathy and solidarity.
  • kuroshiro

    Posts: 786

    Aug 09, 2013 3:03 AM GMT
    willular saidfederal loans will not go away with bankruptcy. you cannot default on them. the debt is there until you pay it off. private loans, I believe do go away with bankruptcy, but I don't know for certain.


    That's what I had read about. My promissory notes from Sallie Mae stated that they couldn't be discharged in bankruptcy, but I'm wondering if that can be argued against considering it is a private loan and from what I can tell doesn't fall under the purview of an educational loan.

    Even if I kept the federal loans, that's something that is manageable.
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    Aug 09, 2013 3:11 AM GMT
    " maybe jump off a bridge "

    DON'T PANIC.

    Debt forgiveness for much of current student loans is coming.

    I will help pay for it, which also sucks but we don't have any choice.

    We would be insane as a society if we allow the next wave of educated professionals to enter the market already in financial ruin.

    Because of the sheer number of guys in your position, if you fail, we all fail.
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    Aug 09, 2013 3:23 AM GMT
    Federal student loans can be discharged in bankruptcy but you have to prove you have a undue hardship which is a very difficult standard to overcome. Also, some bankruptcy judges are better than others at finding undue hardship. Your odds of having them discharged in bankruptcy are very low. The cases where people had them discharged were able to show that they basically were trying to make payments and they could not eat and afford to live off their remaining pay. Finally, the court does not have to discharge all of them. They may discharge just enough to get you out of the undue hardship.

    As a side note, even if you file bankruptcy, that may not necessarily get your mother off the hook. They may pursue her.

    I do not know if Sallie Mae has an income based repayment but that may help. You are in a tough spot, I hope it works out for you in the long run.
  • kuroshiro

    Posts: 786

    Aug 09, 2013 3:30 AM GMT
    FLgator saidI do not know if Sallie Mae has an income based repayment but that may help. You are in a tough spot, I hope it works out for you in the long run.


    They do not. The reason is because they are classified as a "private" loan. This is also why the interest rates are astronomically high for them.

    Ideally if there was a way to just combine this entire debacle into one giant loan, spread it out over 30 years and let me pay it back I'd be content... but since I can't, it makes paying for an apartment, car insurance, utilities, renters insurance, etc rather difficult. :/
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    Aug 09, 2013 3:33 AM GMT
    Other than skipping town or changing your identity, are your parents willing to help you? How about they use the equity on their house to apply for a low interest personal loan or home improvement loan from their bank. Use that money to pay off your debts. You get a job and pay your parents back. Bonus: Your parents get a tax deduction from the loan interest. Win - win.
  • kuroshiro

    Posts: 786

    Aug 09, 2013 3:39 AM GMT
    xrichx saidOther than skipping town or changing your identity, are your parents willing to help you? How about they use the equity on their house to apply for a low interest personal loan or home improvement loan from their bank. Use that money to pay off your debts. You get a job and pay your parents back. Bonus: Your parents get a tax deduction from the loan interest. Win - win.


    Not quite that simple. My parents aren't in a good financial situation themselves. Besides that, no bank would every fork over 100K. I don't even think doing a second mortgage on the house would work. Besides, I have a job. I graduated college three years ago. I moved here to Albuquerque because it was cheaper than where I was (despite living at home) and I was able to land a relatively decent job. I bust my ass to bonus every month, even if it's just an extra $150-$200 in my paycheck at the end... it helps buy groceries icon_biggrin.gif
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    Aug 09, 2013 3:48 AM GMT
    kuroshiro said
    Not quite that simple. My parents aren't in a good financial situation themselves. Besides that, no bank would every fork over 100K. I don't even think doing a second mortgage on the house would work. Besides, I have a job. I graduated college three years ago. I moved here to Albuquerque because it was cheaper than where I was (despite living at home) and I was able to land a relatively decent job. I bust my ass to bonus every month, even if it's just an extra $150-$200 in my paycheck at the end... it helps buy groceries icon_biggrin.gif
    Find a way to get a personal loan. That's the only way you can consolidate the debt and "refinance" it at a lower interest. If you have good credit (in terms of steady repayments) and you have a steady job, you have a shot. Talk to your bank or shop credit unions. Tell them your situation. I think any bank would love to take that $100K loan away from Fannie and Stafford. You've got nothing to lose and everything to gain. Make some calls, visit some banks.
  • kuroshiro

    Posts: 786

    Aug 09, 2013 3:51 AM GMT
    Haha, won't happen. My credit union would only do a max personal loan of $10,000. And they're back home in NY so I'd have to fly home for the paperwork even for that small amount. I've tried this in the past. My credit sucks because of these loans. It's the "debt to income" ratio that kills me for everything.

    I couldn't even get approved to buy a mattress from Mattress Firm via Wells Fargo. icon_redface.gif Guess I stay on my couch for another 4 months haha
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    Aug 09, 2013 3:52 AM GMT
    Student loans are virtually impossible to discharge in bankruptcy and requires one to prove the loan obligation poses "an undue hardship" beyond having payments exceeding their means. Judges usually use the Brunner test which examines 1) good faith attempt at repayment is being made, 2) prove that the loan debt could not be repaid even with a highly paying job and bare minimum expenses, and (the real kicker) 3) there is a "certainty of hopelessness" which has generally been reserved for people who experience a major medical problem and/or disability after the loan debt is incurred.

    If you did file for bankruptcy however, you mom as a co-signer would also have to meet the criteria to discharge the loans she is on.

    If you're on income-based repayment (IBR), the remainder of the debt is forgiven after 25 years of repayment. There's proposals to reduce that time to either 20 or 10 years. Unfortunately, that only applies to the federal loans.

    It really sucks! I wish I could offer something helpful or encouraging.
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    Aug 09, 2013 3:54 AM GMT
    Like I said, it doesn't hurt to try.
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    Aug 09, 2013 3:57 AM GMT
    Have you looked into a debt consolidation loan? They'll combine all the loans into one, and your interest rate will essentially be an average of all the loans. With that high of a balance, you can increase the term to 20 years. I did that with 8 loans with a balance of about $50k.

    Dept. of Ed has a program that pays the balance after 10 years of civil service (definitely federal, I think state also) with 10 years of on time payments. DO NOT expect "debt forgiveness" that people keep floating petitions about. That is not going to happen.
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    Aug 09, 2013 4:08 AM GMT
    There is no easy answer to your problem. As you have stated, you are unable to consolidate your loans and your credit (as well as financial ratios) are not sufficient for a significant personal loan.

    If are you able to get a loan, you only need to address the $65K of Sallie Mae loans. Your direct loan payments on the income-based plan are minimal.

    The only other possible lifestyle changes you can make are getting a roommate to help with rent and trying to cut unnecessary expenses.

    Take some comfort in the fact that most people's salaries increase as they progress in their career/profession and your loans will become more manageable as your pay increases.

    One final note, be careful with taking out personal loans or dischargeable debt to pay your student loans. If you try to file bankruptcy after using dischargeable debt to pay the loans, the court may not discharge the debt because they will assume you tried to defraud the creditor who loaned you the money.
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    Aug 09, 2013 4:26 AM GMT
    I guess I don't understand why you can't pay them off. I have a fairly low paying job (grad student) and I managed to save around half the balance of your total loans over the past 5 years of having this job. If I were in need I would have probably gotten a second job and finish everything off within a few years. Assuming you have a 9 to 5, you can probably get another job as a server or something similar for 6 hours a day on weekdays, plus 8 hours or more on weekends, and still get a good amount of sleep.

    Obviously this equation changes if you're taking care of your family, other dependents, or have some sort of other unusual expense, but if you're just taking care of yourself it seems like you should be able to buckle down and pull it off, though it probably isn't going to be pleasant in any way.
  • kuroshiro

    Posts: 786

    Aug 09, 2013 4:36 AM GMT
    I'm a store manager. I'm salaried and therefore have to be available all the time. Plus, I'm required to work six days in another couple of months because of the holiday season. I work 9.5 hour days (8:30-6:00 three days a week and 12:00-9:30 twice a week) as required by my employer. It nixed my desire to go back to school to get a higher paying job haha. Kinda kills any prospective jobs... Aside from shot boy or bartender I guess.

    Factoring in rent, utilities, gas, car insurance, etc and I barely have enough for groceries. I lose a lot in taxes because of the income bracket I fall into (plus I get screwed--$73 per paycheck for health/dental insurance).

    I never go out and I buy barebones cheap stuff. Now I sound like I'm making excuses but... My paycheck goes poof quickly.
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    Aug 09, 2013 4:46 AM GMT
    Haha I guess I don't know but it seems like I also pay all those bills and only make in the low $30k range and somehow I still have a significant chunk to spare. St. Louis has pretty low standard of living though, which is why I came here in the first place.

    Still, bartender sounds like a great idea actually. If you can make as little as $400 a week that's still like 20k a year, and bartender should be easily able to pull that off and more.
  • Eli_jah

    Posts: 1391

    Aug 09, 2013 4:51 AM GMT
    See if you can get forbearance or income based repayment.Holy shit, student loans are the new indentured servitude. I can't believe you gained $20K in interest alone. Makes me scared, even though I only have $12,191 in student loans, which I have paid down from $15,000 while still in school.

    My question is, do you have any consumer debt?

    EDIT: Okay, I see you are paying only $65 towards your $37K federal loan debt on income based repayment program. But that is PALTRY. You need to pay more.

    You may also want to see about transferring some of your loan debt with higher interest rates onto lower rate accounts.
  • kuroshiro

    Posts: 786

    Aug 09, 2013 5:01 AM GMT
    I'm on income-based for the government. I've used up all deferral options with Sallie Mae (all five times cuz they defer for 3 months at a time). They don't do forebearance or income-based. Forebearance is almost a waste since interest still capitalizes.
  • Eli_jah

    Posts: 1391

    Aug 09, 2013 5:03 AM GMT
    See if you can transfer some of that debt to save on interest.
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    Aug 09, 2013 6:35 AM GMT
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